The estate planning needs of professionals and business owners are similar to others but often have additional complexity due to the types of assets that you own. If you have a blended family with children from prior relationships, or have young children, or are nearing retirement, your concerns are likely the same, but are then magnified because your financial situation is not as straight forward as others.
Planning For A Small Business
Most businesses do not survive the second generation, and much of this has to do with poor planning. It is important to have a plan in place for the continuation of your business and orderly transfer to those you would want to inherit it without disrupting the day to day operations. Without proper planning, many businesses have to be sold are fire sale prices to obtain any value at all.
If you are married, it is also important to make sure that your spouse will be taken care of, and will not have to fight with your business partners over getting paid.
One of the key estate planning documents for business owners is a buy-sell agreement, which has specific provisions for what will happen in the event of your disability or death. These need to be carefully created and then, just as importantly, need to be properly funded, either through earnings of the business or through life insurance. An unfunded buy-sell agreement can put strain on the cash flow of the business, so it is important to consider not just how much your estate will receive for your business, but how it is going to be paid for.
We can help you with your unique business, the operating concerns in the event of your disability and death, and either passing the business on to your loved ones or making sure that your loved ones are adequately compensated for your ownership.
Planning For Professionals
If you are a licensed professional, there are additional considerations when it comes to your estate plan for your business. If you die, your spouse or children cannot continue operating your business or easily sell it, since they are not licensed. If you handle confidential client information, such as lawyers, doctors and accountants, you need to have a plan in place to safeguard your client information. Without adequately planning for your business in the event of your death, it is very possible that your estate will receive little to no value, or worse, that your spouse or children will unintentionally break the law when they attempt to manage it!
Planning For Unique Assets
If you are a business owner or professional, you may have unique assets that require special planning. One of the most common is a large balance in a qualified retirement account such as a Traditional IRA or 401(K). Planning for these accounts requires navigating complex IRS regulations. Without proper planning, your heirs may be required to liquidate these accounts in 5 years or less (and pay all of the taxes at once!). You may also have other unique assets, such as a defined benefit plan or cash balance plan, restricted stock, stock options, deferred compensation, or passive business interests in LLC’s or other entities. A “basic” estate plan won’t cut it when it comes to these types of assets.
As a business owner or professional, you may be more aware than others of the threat of a lawsuit against your heirs. You may also be concerned about the risk of a divorce of one of your children, and if you ex-son-in-law or ex-daughter-in-law will end up owning half of what you leave to your children. We can help you create an estate plan that not only distributes your assets as you want, but protects them from creditors, lawsuits and divorce.
Schedule a consultation today to find out more about how we can help.